Ahead of the Open: Corn, Soy Trade Pauses Ahead of USDA Aug. 12 Reports

Posted on 08/07/2019 7:55 AM


Corn: Steady to up a penny
Soybeans: Up 1 to down 1 cent
Wheat: Steady to down 3 cents

General Comment: Corn and soybeans  edged higher last night as traders assessed rain forecasts for the Midwest after a recent dry spell, while looking ahead to a USDA first survey-based crop production forecasts on August 12 that will also include acreage revisions based on resurvey 14 mostly Midwest  states following rain-hit planting in spring.

Traders polled by Reuters forecasts corn production would fall to 13.193 billion bushels, down from 13.875 projected by USDA in July. However, the range of estimates is nearly 800 million bushels, 12.723 billion to 13.550 billion. Soybean production may fall between 3.633 billion to 3.974 billion with an average of 3.800 billion bushels, the poll showed, In July, USDA projected 3.845 billion. The Doane/Pro Farmer crop forecasts are 12.825 billion bushels of corn and 3.76 billion bushels of soybeans.

The U.S. Midwest weather forecast remains with differences but still suggesting less than average rainfall and average to below average temperatures. The below average rainfall gets accentuated in eastern Iowa and northwest/central Illinois the next week. However, rains elsewhere will be beneficial.

New Zealand's central bank stunned markets on Wednesday by cutting interest rates a steep 50 basis points and even flagged the risk of going nuclear by taking rates below zero, a radical shift that drove its currency to three-and-a-half year lows. Seemingly trying to get ahead of policy easings in the United States and Australia, the Reserve Bank of New Zealand (RBNZ) slashed its official cash rate (OCR) to a record trough of 1% and opened the door to truly drastic action. India unexpected cut rates 35 basis points this morning. Japanese 10-year government bonds fell to a minus 0.215%, the lowest since July 2016 and Germany’s benchmark 10-year bonds fell to a record low of minus 0.58% after data showed industrial output fell more than expected in June. Markets are wagering the European Central Bank and Bank of Japan will have to follow or risk their currencies rising to uncompetitive levels. Several major European banks reported declines in first half profits as low interest rates threaten to crush revenue faster than companies can cut costs. Investors this week feared Beijing had opened a new front in the currency conflict by allowing its yuan to weaken past 7.0 per dollar, pressuring competitors to follow suit. Those fears were underscored after Washington labelled China a currency manipulator in a dramatic escalation of the trade dispute between the world's biggest economies.

The bottom line this morning is the emerging market currencies are all at new lows for 2019 versus the dollar, reduced the competitiveness of U.S. farm products and other exports on the world markets.

President Donald Trump on Tuesday promised farmers that China’s aggression against U.S. agriculture in the spiraling trade war “will not be able to hurt them” – and vowed that “if necessary” he will give them more aid in 2020. Keeping farmers on his side is a crucial political goal for Trump, who is up for reelection next year and has shown no indication that he is willing to back off his fight with China. In May, the Agriculture Department announced a $16 billion aid package. The stakes for farmers shot up Monday, when Beijing confirmed that it would stop buying U.S. farm products in retaliation for Trumps pledge last week to slap 10% tariffs on an additional $300 billion of Chinese goods that don’t already have levies.

Meanwhile, China is facing increasing domestic problems A top Chinese official said today that the situation in Hong Kong was the worst since the former British colony return to Chinese rule in 1997, as antigovernment demonstrations continue with little prospect of resolution. China stocks fell for a sixth straight session ahead of trade data on Thursday that is expected to show export fell 2% from a year ago and Imports contracted 8.3% from a year earlier.

Oil prices fell further on Wednesday with Brent oil now down 20% from the 2019 high after falling more than 9% in the past week amid rising global trade tensions, weakening currencies and fears of a global economic slump. U.S. stock futures are slightly higher after a softer rhetoric on trade war from U.S. soothed investor concerns, but Asian shared remained in the red. European equities roses slightly on deal-making activity in the German chemical sector. Gold prices rose more than 1.7%, topping $1,500 for the first time since 2013. 

USDA daily export announcement service said private exporters reported sales of 165,000 metric tons of soybeans for delivery to unknown destinations during the 2019-20 marketing year. The first daily sales announcement since July 31 when 104,500 tons of soybeans sold to unknown destinations for mostly new-crop delivery.


Corn: December futures opened firm and traded both sides of unchanged before rising near session highs a couple of hours ago. Prices are drifting back new unchanged at the session break and have been well contained inside of Tuesday’s range heading for a third gain in four days.

Soybeans: November opened steady to slightly weaker, falling below yesterday’s low before uncovering light buying and short covering interest. But the rally attempt fell far short of Tuesday’s session high. Prices are seen opening about 8 cents below short-term resistance at $8.74 ½ this morning.

Wheat: Futures seen on weaker amid plentiful global supplies of wheat remained an obstacle for U.S. export prospects, while a firm dollar has also made U.S. supplies less competitive. No U.S. wheat was offered in a tender held by Egypt on Tuesday, in which the world's top wheat importer purchased 415,000 metric tons (MT) of Russian, Romanian and Ukrainian crop.


Cattle: Mixed to firm
Hogs: Steady to weak

Cattle: Futures seen steady to firm. Iowa, Nebraska and Texas saw some cash cattle trade in the $185 area yesterday, which was steady with the week prior. But otherwise, all was quiet on the cash market front. Boxed beef values continue to creep higher, with Choice gaining $1.08 on Tuesday and Select rising 98 cents. Movement also improved a bit to 122 loads. The market could be seeing a lift from some Labor Day buying.

Hogs:  Lean hog futures seen trying to stabilize after Tuesday’s rally failed to hold. Cash hog bids slipped another 94 cents on Tuesday. However, pork cutout values rose 60 cents on strength in every primal cut except loins. Movement was moderate to good. The average wholesale price of pork surged 29.8% from year-ago levels to 21.59 yuan ($3.10) per kilogram in June, according to the country’s ag ministry. An outbreak of African swine fever in China is forecast by experts to wipe out about a third of Chinese pork production this year, or 18 million MT, twice the amount of pork exported worldwide every year. China is not the only country hit. There have been outbreaks in Vietnam, Cambodia, Mongolia, North Korea and Laos. It has also already spread across parts of central and eastern Europe and even been found in wild boars in Belgium. Bulgaria has failed to contain the spread of African swine fever, its deputy agriculture minister said on Wednesday amid concerns that the Black Sea country could lose its entire 600,000 pig breeding industry

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